costs. In Indianapolis, about 40 percent of
households that make between $35,000
and $50,000 annually spend more than 30
percent of their income on housing. That
percentage spikes dramatically for lowerincome households. It’s 80 percent for those
between $20,000 and $35,000. It’s nearly
100 percent for those under $20,000.
This squeeze on lower-income
people creates ripple effects that magnify
the problem.
For example, it forces people to
seek housing in areas ever-further from
So how does inequality
where they work. And that can impose
affect housing?
heavy burdens on the poor in cities like
It skews the market among people with
less money. By definition, people with more Indianapolis, where the public transportation
system is under-developed. One study found
income have more options. When they
that if affordable is defined as a household
buy homes below their means—a rational
spending no more than 45 percent of its
choice—they lower the supply of affordable
housing for lower-income buyers, preventing income on housing plus transportation,
much of Central Indiana would fall into the
them from buying or renting at a price that
category of unaffordable.
meets their needs.
is why measures of the housing market that
don’t account for it are incomplete and not
entirely accurate.
The telltale sign of inequality is the lack
of upward mobility from one generation
to the next. And while housing prices
are relatively low in Indianapolis, income
inequality is high. One study ranked it 47th
out of the 50 largest regions in the US in the
likelihood that a child born in poverty will
achieve wealth in adulthood.
In other words, affordable housing is
often purchased by higher-income people,
putting a squeeze on people with less income.
A widely accepted rule of thumb
is that no more than 30 percent of a
household’s income should go to housing
Creating virtuous cycles
The upshot is that the goal of creating
more affordable housing should begin
with a big-picture vision of the economy.
Addressing the problem in isolation is like
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